HONG KONG Jan 8 The Chinese currency traded outside the country's borders hit a record high on Wednesday, driven by seasonal yuan demand at the beginning of the year and increased bets on further currency appreciation.
The yuan rose a solid 2.9 percent against the dollar in 2013 and traders see similar gains this year after the central bank promised to tone down its interventionist policies in the foreign exchange markets.
A wave of structured-product selling by banks, the net result of which is the buying of the Chinese currency, also buoyed the yuan.
"Usually, at the start of year we see a lot of options products being marketed and sold to clients where the delta hedging requires selling USD and buying CNH," said a trader at a Chinese bank in Hong Kong.
The offshore yuan or "CNH" as it is more widely known , briefly hit 6.0345 in morning trade, widening its premium over the onshore yuan to 170 pips, compared to only 9 pips on Jan. 2.
The gap between the offshore yuan and its non-deliverable forward counterpart in the forwards market also widened.
The People's Bank of China fixed the yuan's mid-point versus the dollar at 6.1079 on Wednesday, 0.06 percent weaker than the previous day.
Sentiment toward the yuan remains positive despite signs that China's economy lost some steam in late 2013, with long positions in the currency rising to the highest level since late May last year, a Reuters poll showed.